Amazon’s Downton Abbey Coup: Bad News For Netflix

If there was any doubt, it’s now clear that Netflix Inc. has some serious competition in the streaming video world.

Amazon's disclosure on Friday that it has exclusive rights to stream “Downton Abbey” as far as a possible fifth season throws down a gauntlet to Netflix. The streaming service has been getting all the attention as a possible competitor to traditional TV channels like HBO, accumulating 27 million streaming subscribers in the U.S. and licensing original shows such as “House of Cards”, which starts today. But Amazon is showing that it is serious about establishing itself in this arena as well.

“Downton Abbey,” for those living under a rock for the past couple of years, is a hugely popular series. The premiere episode of the third season, which debuted in the U.S. last month, drew 7.9 million viewers on PBS, which airs the show here, quadrupling the network’s average primetime rating, PBS said.

What makes Amazon’s coup so painful is that Netflix was the place to stream “Downton” – at least the first season, ideal for anyone who missed those episodes to catch up before watching later seasons. But Amazon’s Prime Instant Video is now the place for such dilatory viewers — it has first and second seasons and will stream the current season starting in June, it said Friday. And while the first season is still available on Netflix, Amazon indicated that wouldn’t be the case for much longer. It said in a statement that “later this year, no digital subscription service other than Prime Instant Video will offer any seasons” of the show.

Of course, Amazon has been striking licensing deals with entertainment companies regularly over the past few months, at a similar pace to those of Netflix. This deal, though, will put a spotlight on just how much programming is available on Amazon.

A strength of Netflix has always been its low price — $7.99 a month for streaming, which compares very favorably with cable TV. Amazon’s service, though, is even cheaper. To watch Amazon’s Instant Video streaming, viewers need only subscribe to the e-commerce giant’s Prime service, which costs $79 a year, about $16 less than the full year cost of Netflix. And Amazon Prime subscribers get lots of benefits, including free shipping.

Amazon chief executive Jeff Bezos has also shown a willingness to invest heavily in expanding into new areas, regardless of the short term impact on profits. That makes the company a formidable competitor for anyone – particularly a smaller company with more limited resources, such as Netflix.

Still, Netflix has one big advantage. All it does is deliver entertainment – either through DVDs or streaming. Amazon, on the other hand, is trying to deliver all kinds of goods and services. Whether it is willing to spend enough in the long term to compete with Netflix is far from clear. But for now, “Downton Abbey” fans know which service they prefer.

An earlier version of this post contained an incorrect spelling of the show’s title in the headline. It has been corrected.